De Villepin pledges more jobs by taking policies from right and left

A bizarre left-right cocktail of job creation through protectionism, state spending and less red tape has been proposed by the new French Prime Minister, Dominique de Villepin.

In his maiden parliamentary speech, M. de Villepin signalled a push by Paris for a "fortress Europe" to protect jobs against globalisation and Asian competition. He said: "We have a right to demand European economic preference, just like all the other big economic blocs."

M. de Villepin said France's commitment to European integration remained "unshaken" by the "no" vote on the proposed EU constitution 10 days ago. He added, however, that France would look for ways to establish a "union" with Germany on an unspecified range of policies - reinforcing fears that Paris and Bonn may now seek to create an "inner core" of EU countries.

The greater part of M. de Villepin's 55-minute speech to the national assembly yesterday was taken up with a programme to combat unemployment by making it easier for small businesses to hire new employees, especially the young.

A €1,000 (£670) state bonus will be given to any unemployed person taking a job after at least a year on the dole. Businesses employing fewer than 10 people will be allowed to take on employees on temporary contracts for up to two years. The government will, in effect, subsidise the pay of people hired by some small businesses.

M. de Villepin, who has no previous experience in social and economic policy, also promised to increase spending on transport and environmental projects. He announced state grants to create 100,000 jobs as home-helps and child-minders.

Altogether, he promised to spend an extra €4.5bn on job-related policies next year. M. de Villepin promised, however, that French public spending would remain frozen in real terms and would respect from 2006 the borrowing limit of 3 per cent of GDP which has been set for countries belonging to the euro.

M. de Villepin, a published poet, historian and career diplomat, is a protégé of President Chirac who has never stood for election. Politicians of both left and right saw him as an odd choice to respond to the populist insurrection which led to the rejection of the proposed EU constitution.

The Prime Minister gave a polished performance yesterday, however, restraining his usual flights of rhetoric and trying to adopt a balance between deregulation (to please the right) and appeals for social solidarity (to appease the left).

The 10 per cent unemployment rate in France, coupled with low disposable incomes for many of those in work, is believed to have been a decisive factor in the French vote against the EU constititution. The referendum campaign also revealed a deep fear in France of free trade, globalisation and enlargement of Europe to the east - hence M. de Villepin's reference to "European economic preference".

Building a higher trade barrier around the EU runs counter to the official policy of Brussels and the rules of the World Trade Organisation. M. de Villepin's comments amounted to a shot across the bows of those in Britain who believe the collapse of the constitution presents a chance to impose a new gospel of even freer trade in Europe.

The centre-right Prime Minister went out of his way to please the many French voters of the left who discovered, with horror, that the proposed constitution contained free-market language copied from European treaty to treaty since 1957. "The meaning of Europe rests in its values," he said. "It cannot be constructed by market forces alone."

However, M. de Villepin also implicitly warned the unions, the vast public sector and the French left that they must be ready to accept change. Sounding almost Blairist at times, M. de Villepin asked politicians of left and right to put aside "prejudices and dogma". Jobless people who refused work on more than three occasions should have their benefits reduced, he said.

M. de Villepin was unusual in making his maiden speech almost as unpopular with his own camp on the centre-right as with the left. Many members of M. Chirac's UMP party say they regard their leader as neither the President of the republic, nor the Prime Minister, but the Interior Minister, Nicolas Sarkozy.